Sixteen Senate Democrats and one independent broke with the White House on Wednesday to oppose a student loan package they believed would be worse than current law because it would implement a market-based formula with caps higher than current federal loan rates.
"We could do much better than this," said Sen. Jack Reed, D-R.I., in the moments before Wednesday's final vote began. Reed had co-sponsored a one-year patch to the expired student loan law, which would have kept federally subsidized Stafford loan rates at 3.4 percent.
Democrats have been divided on the issue in the weeks weeks since subsidized Stafford loan rates doubled July 1. Many Democratic members, especially on the left, felt jammed by the Obama administration's most recent budget, which imposed a market-based formula pegged to 10-year Treasury notes that Republicans generally liked and Democrats typically hated. But in the push to strike a deal, Democratic leaders, as well as the center-left members who broke ranks in June to begin negotiating with Republicans, were able to peel off enough of their members to join the GOP in passing a permanent fix to the loan issue.
Reed characterized the Senate compromise plan as "short-term rate relief but long-term rate pain." As the American economy strengthens, Treasury rates will increase, so the lower rates available to students now likely will not be available in the future. Republicans have long argued for a market-based approach, and the House GOP already approved a plan that included a Treasury-note-based formula. But the House measure did not lock in rates for the lives of the loans issued. Any plan without the stipulations of locked-in rates or any caps at all is a non-starter with Democrats.
Democrats Reed, Elizabeth Warren of Massachusetts, Tammy Baldwin of Wisconsin, Richard Blumenthal of Connecticut, Barbara Boxer of California, Sherrod Brown of Ohio, Benjamin L. Cardin of Maryland, Kirsten Gillibrand of New York, Mazie K. Hirono of Hawaii, Patrick J. Leahy of Vermont, Edward J. Markey of Massachusetts, Robert Menendez of New Jersey, Christopher S. Murphy of Connecticut, Debbie Stabenow of Michigan, Tom Udall of New Mexico and Sheldon Whitehouse of Rhode Island voted against the bill. Vermont Independent Bernard I. Sanders, who caucuses with Democrats, also was a "no." Sen. Mike Lee of Utah was the only Republican to vote against the measure.
The final vote was 81-18.
Some Democrats touted the deal approved Wednesday as the best that negotiators could get. Even Senate Health, Education, Labor and Pensions Chairman Tom Harkin urged his colleagues to support the bill.
Last week, however, the Iowa Democrat suggested that even this "permanent" fix could be changed as soon as next year.
“Any law’s subject to change; this one is, too,” Harkin said. “We don’t know how it’s going to work in the future in terms of interest rates or what interest rates may be, all we have to go on is CBO estimates and we all have to play by these — this rule-book. That’s why I want to take another look at it in the higher education act next year. Let’s see where the economy’s headed, let’s see where the interest rates are headed."